Why the Bar should pipe down about referral fees

Referral Fees are in the news again, or at least on twitter, with John Cooper starting a ‘grassroots campaign’ against them. I’ll say straight off that I’m against referral fees, I’ve never paid a referral fee (or taken any for that matter) and don’t intend to in the future. My view is that they are potentially illegal (I wrote a paper on it for chambers last year where I said it was potentially unlawful under the Bribery Act and was somewhat surprised to see that the Bar Council actually had the same view – although there is clearly never going to be a prosecution) and certainly not in the interests of justice.But, I have been slightly annoyed by the attitude of the Bar over this, and want to set out why they don’t really have a leg to stand on.

Firstly though – what are referral fees? It’s not as straightforward a question as it seems. One barrister’s referral fee is the LSC business model. Basically, for legal aid work, the money for the work done is split in to two –the Litigators Fee that is paid to the solicitors firm who prepares the case and the Advocates Fee, the money paid to whoever conducts the trial. For the sake of argument, imagine the Advocates Fee is £1,000 (gross oversimplification, but bear with me). The solicitors firm chooses the advocate (actually, the client does, but you know what I mean). Those firms that have an in-house advocate (solicitors or barrister) can use them or, as with all firms can choose from a freelancer (solicitor-advocate or a barrister in chambers).

So, here’s the idea – times are hard with legal aid; solicitors firms need to cover costs wherever they can. Given that the firm controls where the advocacy goes, why not ask for something back when giving a case out? For example, in a case where the fee is as above, give it to advocate Ms X on the basis that she gives the firm £100 – money for nothing. Freelance solicitors can do this and as far as the SRA and the Legal Services Commission go, this is simply a perfectly permissible commercial transaction. The catch is that barristers can’t.

Under Part III of the Code of Conduct, a barrister cannot :

“(d) give a commission or present (save for small promotional items ) or lend any money for any professional purpose to or (save as a remuneration in accordance with the provisions of this Code) accept any money by way of loan or otherwise from any client or any person entitled to instruct him as an intermediary; (e) make any payment (other than a payment for advertising or publicity permitted by this Code or in the case of a self-employed barrister remuneration paid to any clerk or other employee or staff of his chambers) to any person for the purpose of procuring professional instructions;”

This has been confirmed repeatedly by the BSB. It does not require a brown envelope to be passed over. Significantly, an agreement to work on a percentage is also covered, as is any agreement that results in Ms X receiving, less than 100% of the fee with the solicitors keeping the remainder. This obviously puts barristers at a competitive disadvantage. The Bar have consistently complained and campaigned at the fact that solicitors are free to pay and receive referral fees and have got nowhere (if anyone complains about solicitors keeping work in house, it is a tribute that they instruct the bar as much as they do).

More fundamentally, the Bar is opposed to referral fees due to the fact that it compromises an advocate’s independence and allows financial considerations to be determinative of who a solicitor instructs. So what’s the problem? Well, Part III of the Code applies to all barristers, including those who are employed. And most of those are not on a fixed salary, but either a straight percentage, or salary plus bonus depending on how much they bill. This has been accepted by the Bar Council (and later by the BSB as well) without a whimper.

The problem I have is that once that is allowed by the Bar, any argument from principle about Referral Fees compromising independence, or allowing financial considerations to play on the minds of solicitors is, to my mind, blown out of the water. Further, a solicitor who chooses to instruct their own in-house barrister who is employed on a percentage basis is dealing, on the Bar’s definition, in a referral fee pure and simple. Arguments that an employed barrister is required to work for the firm that employs them solely and exclusively don’t match reality. And if a barrister is on a percentage only, then there is little argument.

If the Bar’s argument on the Bribery Act and the meaning of the General Criminal Contract is right, then it potentially applies to the whole principle of solicitors having in-house advocates of whatever stripe. That’s obviously out of the Bar’s hands, but what is in their control is the regulation of those barristers that are in-house and currently they are permitting referral fees in all but name.

So, if the bar is really serious about referral fees, then great. But if referral fees are wrong, then they are wrong for all barristers. If firms should have no financial incentive to brief one advocate rather than another, and if independence is important, don’t allow two classes of barristers and waive these principals in relation to one. The bar has no control over the SRA or the LSC, but before complaining about others, put your own house in order.

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2 thoughts on “Why the Bar should pipe down about referral fees

  1. Pingback: In defence of … the CPS | Life in the bus lane

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